As you may know, investing is one of the most popular ways for individuals and families to build up their funds and effectively plan for their future. But if you are not familiar with what you are doing in that particular area, the whole process can seem quite overwhelming, right? Well, if you’ve made the decision to make an investment, you’ve taken that first step… now it’s about learning and acting on what you learn to make it work for you financially. The ETF is a somewhat popular form of investment, but like any other, it has both its benefits and its drawbacks. On the one hand, they differ from stocks, which are another option. They have their good points and their bad points, however, only you can decide if an ETF is right for you. Here is some information to help you find out. First, we’ll break down the ETF itself and help you better understand what you may be dealing with. Next, we’ll dive into the Soy ETF specifically. So, read on to see if the ETF is a suitable investment option for you.
The Soy ETF: What is it and how can it work for me?
If you have investment experience, you are probably quite familiar with the ‘exchange-traded fund’, or ETF, but for those of you who are not, we thought we would get in touch with you. While it differs from real stocks, an ETF is a collection of funds or securities that can include stocks. You can invest in any number of things when it comes to ETFs, including our topic, soybeans. It is called an ‘exchange traded fund’ due to the fact that they can be traded, just like stocks. This process is not like mutual funds, as they are NOT traded on the stock market. However, they have the advantage of being diverse, just like mutual funds. Soy ETFs are exchange-traded funds that are based on soy and offer investors a glimpse into the future of soy. You do not need a futures trading account with this ETF. The investor is in a better position to make good investment decisions with this option and therefore gets better returns for their money.
Here is a brief explanation of how Soy ETFs work:
- The asset owner, or ‘funder’, creates a fund to track the progress of the assets.
- The fund provider sells parts, or ‘shares’, of that fund to those who invest (shareholders own the shares, but not the assets).
- Investors get ‘lump sum dividend payments’ in return, which can also be reversed and reinvested
- Buyers and sellers can trade the shares during the day on the exchange for financial gain.
When it comes to soy ETFs in particular, they are said to be a great investment for younger investors for a number of reasons. First, there are low fees involved, which is great for those just starting out. Second, they facilitate management due to the wide variety of options. They are also easy to liquidate and there are many to choose from. However, soy ETFs also have their downsides. For example, according to Investopedia, some of the setbacks investors can experience, and should be aware of and watch out for, include:
- Pay Attention to Fees – While ETFs are typically a low fee investment option, you may find prices that are a bit steep and can take a bit of a walk.
- ‘Capital Gains Distribution’ – This type of return involves paying a ‘capital gains tax’, so keep this in mind before investing.
- Invisible Risks and Fluctuations – There will be times when the most subtle and important changes, and the risks that accompany them, will not be immediately apparent… do your research before you invest!
- Difficulty with liquidation: Sure, most soy ETFs will be easier to liquidate than others, but there are times when difficulties can be encountered. Know the prospects before investing your money There are many good points to invest in, so the key is to be well informed… educate yourself well before investing your money in anything, and you will find that in the end you will have less regrets. So how should you invest in this way?
How to invest in an ETF
So what do you do if you want to start? If you have a lump sum total, it’s pretty easy. Just consider how much you are working with, find out how many shares you want to buy (as well as the commission cost to the broker), and make the purchase. Stocks can also be purchased through what is called “dollar cost averaging”. With this method, take the same …